Abstract/Description

The European Commission has published
a...

Notes

The European Commission has published
a memorandum elaborating its criticism of the US Farm Bill, on July
11th 2002. It argues that the EU's emphasis is on reducing traditional
trade-distorting forms of support not farm support per se. Therefore
it dismisses the US system of counter-cyclical payments as measures
which will 'inevitably lead to overproduction, disrupt world markets
and hurt further farmers in developing and other countries'. It
sees the USA as progressively increasing, not reducing, trade-distorting
forms of support since the Uruguay Round agreement, a course of
action inconsistent with the spirit of that agreement.
The memorandum criticises the US calculation of the Aggregate Measure
of Support, claiming that it omits between US$4 and US$5 billion
of price support for sugar and dairy products from the calculation.
It furthermore claims that actual expenditures cannot be predicted
since the farm Bill itself will have price-depressing effects and
thereby increase counter-cyclical expenditures.
While the USA is committed to making adjustments 'as far as practicable'
to ensure compliance with its WTO targets, the EU questions how
binding such commitments will prove. It suspects that the USA may
try to reclassify certain payments as 'non- product specific', thereby
enabling them to escape WTO constraints.
The EU claims that the US Farm Bill will make it more difficult
to agree on new targets for reducing trade-distorting forms of support.
Although it acknowledges that even after the US Farm Bill, the WTO
ceiling on EU farm expenditures is still three times higher than
the US WTO ceiling, it maintains that this is not the issue. Compliance
with WTO commitments and the direction of expenditures is more important,
and EU expenditures are now well below the allowed WTO ceiling (only
twice US levels) and are going down while US expenditures are going
up.
The EU points out that the USA exports far more agricultural produce
to the developing world than does the EU, with the EU losing world
market share in farm commodity products. This the EU maintains is
a consequence of US support policies which have particularly severe
effects on rice and cotton markets, both of which are important
to vulnerable developing countries.
The EU maintains that the path for CAP reform is coherent and consistent
with both the letter and spirit of the WTO agreement on agriculture,
since it seeks to shift expenditures away from more trade-distorting
forms of support to less trade-distorting forms of support. This,
it claims, is in stark contrast to US policy reform which is unpredictable,
incoherent and 'flies in the face of consensus in WTO'.
Comment:
It should be noted that much of the debate about the extent of trade-distorting
forms of support in the EU and USA hinges on self-definition, and
is at times an exercise in 'smoke and mirrors'. From the perspective
of ACP developing countries there is clearly a need for much stricter
international agreement on what is a more or a less trade-distorting
form of agricultural support and what should and should not be allowed
under WTO rules, based on the affects the various measures have
on actual markets of importance to developing countries and the
relative competitive position of developing-country producers and
value-added processors.
It can be argued that the impact of US policies on the attractiveness
of the US market to developing country exporters is in fact indicative
of what the EU is trying to promote through the process of CAP reform.
The current trajectory of CAP reform is reducing the market price
of CAP products and making the EU market less attractive to preferential
suppliers, such as those in the ACP, than was previously the case.
Equally the process of CAP reform would appear to be designed to
make EU exports more price competitive internationally.
In many instances current EU criticisms of what the US is trying
to do could also (though in a somewhat different context) be applied
to the EU's own reform process. For example by introducing a multi-product
single farm payment scheme the EU would effectively make its basic
system of farm support 'non product specific', thereby escaping
WTO constraints on product support.
It should also be noted that the EU's declining world market share
in farm commodity products is in part a consequence of its success
in exporting more value-added food products. The EU's declining
position in world agricultural commodity trade needs to be seen
in this context.